Page 318 - THE MARKET WHISPERER

314 PART 10 - Winning Trades

is greater than sellers, click the button. In cases such as these, which are
naturally less clear than the classic reversals in five-minute candles, I will
usually buy using half-size and wait for clearer technical indicators in
order to buy the second half. I will also buy that second half even if the
price is lower than my initial entry point, or if the price rises immediately,
than at a higher entry point that is not significantly higher than my initial
entry. In other words, I am willing to admit my error and understand that
I bought the half-size at a slightly too high price, and add the remainder at
a lower price. However, if it becomes clear that I have bought at the right
entry point and the stock price rises, I am not willing to chase the price and
buy at significantly more than I originally paid, and will therefore make do
with just half the size. Being in control of this procedure requires a good
degree of skill, experience, and “artistry,” and is not suited to new traders.
As long as you are still new to trading, seek classical reversals, and if there
are none, forego the trade and wait for the next interesting stock.

Summary: Reversals

Unlike buying at a breakout or shorting at breakdown, buying at a reversal
is a more correct and calmer entry point, less risky, and with a better risk/
reward ratio. Its disadvantage is its psychological strain. It is far more
natural and simple to buy at the breakout of a new high. At the breakout,
we buy a stock reaching new highs, while in reversals we buy stocks
trending down during their overall uptrend. Buying a stock trending down
will always be more difficult psychologically than buying a stock trending
up. We need to overcome our natural emotions and hesitation, understand
that strong stocks almost always pull back, and that their chances of
returning to highs are far greater than their chances of continuing to drop.
Be courageous, and click the button. Don’t worry: with a little practice and
experience, it will all become clear.